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Tencent: Key Takeaways from Its Q1 Earnings

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May. 16 2019, Published 1:50 p.m. ET

Tencent

Tencent (TCEHY) released its first-quarter earnings on May 15. The company reported revenues of $12.7 billion—a rise of 16% YoY (year-over-year). However, the company’s revenues missed the consensus estimates. According to Bloomberg, Tencent’s first-quarter revenue growth was the slowest since its listing in 2004.

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Tencent reported a net profit of $4.1 billion in the first quarter. The net profit increased 16% YoY. The company’s net income margin was flat at 33% compared to the first quarter of 2018. Tencent closed in the red on May 15 after its revenues missed the estimates. Tencent’s first-quarter earnings were at record highs. In the fourth quarter, Tencent reported the steepest decline in its earnings. The company’s annual earnings growth rates also fell to multiyear lows in 2018.

Gaming revenues

Tencent’s first-quarter online gaming revenues were similar to the first quarter of 2018. The company’s online gaming revenues fell last year amid China’s ban on new gaming approvals. Tencent’s CEO, Ma Huateng, said, “We are invigorating our game business with popular releases such as Perfect World Mobile in China, while PUBG MOBILE is growing internationally.”

In the first quarter, Tencent has started reporting the results for its FinTech and Business Services segment. The segment reported a 44% YoY rise in its revenues in the first quarter. The segment is seeing fast growth even though other segments have seen their growth rates slow down. Tencent’s VAS revenues increased ~4% in the first quarter.

Alibaba (BABA) also released its earnings on May 15. The company beat the top-line and bottom-line estimates. According to CNBC, David Dai, a senior analyst at Bernstein, said, “I would say that Alibaba has reported a very strong set of results.”

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